Expect Lower Investment Returns Next Year, Nuveen Says

Advisors should direct their clients to health-care and payments companies for the coming year, which will probably see more growth than most companies in what's predicted to be a slow-growth economy, said Saira Malik, head of equities at Nuveen.

As investors start to look to 2020, Malik offered insights into the coming year when events such as the presidential election and tariff uncertainty could create more volatility in the market.

“We are looking at ‘lower for longer,’” meaning lower return rates but no recession, Malik told Financial Advisor magazine. “Today’s structurally low interest-rate environment will lead to lower market returns overall,” but Nuveen does not see the much-talked-about recession happening any time soon. Instead, the longest bull market in history will continue.

Healthcare brands like Merck show potential for expansion and companies like Visa and PayPal see tailwinds from payments industry growth. At the same time, investors generally should avoid cyclical sectors such as the automobile industry and others that are leveraged to the economy to avoid the associated risk of downturns, she said.

However, all is not good.

“Noise around the 2020 election, along with on-going tariff negotiations and Brexit concerns, will create more short-term volatility,” she added. “And we are not going to see much economic growth, either domestically or globally. It would be hard for the markets to climb higher from where they are now: 2020 returns will not be as good as 2019.”

Investors should look to places like Brazil for opportunities, Malik added, “and they should look to earnings. When you take a step back, investors need to focus on earnings growth, which is dependent on economic growth.”

The age of over-relying on the best-performing tech stocks has passed and investors should make sure their portfolios are well balanced and diversified to cope with the current volatile environment, she said.

Equities will continue to be strong compared with fixed income, in part because of the current low interest-rate environment. Advisors should direct their clients to companies that are putting cost-savings plans in place, Malik added.